Jack Birner contributed a paper titled "A roundabout solution to a fundamental problem in Menger's methodology and beyond" to a symposium on Carl Menger's legacy, held at Duke University where Menger's papers were deposited by his grand daughter. His library (one of the three biggest private collections on record) ended up in Japan. The symposium proceedings appeared in a supplement to the History of Political Economy (volume 22, 1990) and in Bruce Caldwell (ed) Carl Menger and his legacy in economics, Duke University Press, 1990.

Birner explained how some of Carl Menger's ideas might be brought up to date to make a significant contribution to the epistemology and methodology of the social sciences. Birner is a brilliant and versatile scholar, well versed in the works of Popper and Hayek, also in the history of ideas in economics and the philosophy of mind, among other things.

Menger's first book Principles of Economics (1871) contributed to the "marginal revolution" in economics. The key insight of the marginal revolution (at least in Menger's version) was the subjective theory of value, whereby the value of a good is decided by the amount that someone is prepared to pay for it, rather than the amount of labour that went into making it. The significance of the term "marginal" is that the value of a good declines as the purchaser has more of it.

On Birner's account, Menger's first book was written in diplomatic terms and was dedicated to Wilhelm Roscher, the protagonist of the older Historical School. Menger offered an alternative approach to that of the contemporary Historical School led by Gustav Schmoller. The members of the Historical School refused to accept the "Manchester" doctrine of classical economics, in favour of the idea that every period had its unique character so that there are no general principles of economics or social science to be found.

Menger's Challenge to the Historical School

Menger's second book came over a decade after the first. Investigations into the method of the Social Sciences (1883) was more strongly worded in order to deliberately start a debate about methodology. He was not opposed to historical studies and he wanted to sketch a bigger picture to show how the historical sciences and the generalising sciences could coexist and cooperate instead of talking past each other. For Birner the chief message of the book is a strong form of methodological pluralism - "To each goal its method". This may be compared with a similar effort at synthesis in psychology by Karl Buhler with Crise etc (1929). LINK and footnote.

Menger identified various subdisciplines which he considered could be found in both the natural and the human sciences.

1. Historical studies of individual or concrete phenomena and sequences of events.

2. Morphological sciences, which pave the way for the theoretical sciences.

3. Theoretical sciences which yield general laws of typical phenomena.

4. Practical sciences or technologies.

Menger wanted to explicate the methodological rules that would permit economics to qualify as a theoretical science (type 3) and Birner suggests that he should have been more clear about this by stating that "the exact theoretical sciences are about certain sides of all phenonmena in abstraction from disturbing factors". Birner wrote "Most methodological precepts have their roots in ontological considerations, and Menger's are no exception. He believes in the existence, in reality, of several fundamental motives for human behavior, which he calls alternatively 'influences', 'goals', 'forces', 'drives', and 'fundamental tendencies of human nature'."

These are the economic drive, moral sentiments, altruism and justice. The influences of these drives are (respectively) the subject matter of economics, social philosophy, ethics and jurisprudence.

Each of these influences can be subject to disturbing influences, among them error, ignorance, force and neglect. So any particular action can have mixed motivation and it can also be diverted from (or be inappropriate to) its prima facie object due to the influence of one or more of the disturbing factors.

This means that the laws of supply and demand are not falsified by charitable acts or by paying a high price for bread that is cheaper in the next shop (because we are in a hurry), any more than the law of gravitational attraction is falsified by an apple that is firmly attached to the tree. Every science has to develop methods to take account of alternative influences and disturbing factors, and that results in the massive technology of observation, experimentation and statistical analysis.

The Problem of Justification or "Justificationism"

Birner then went on to examine the logical and epistemological problems that Menger encountered. He was a scientific realist and he maintained that both empirical and exact theories are descriptions of reality. But he ran into problems with the justificationism, verification or foundations for general (universal) laws.

"For Menger (and his contemporaries, with the possible exception of Whewell) the logical or epistemological problem of the relation between exact and empirical theory is a problem about the justification of knowledge: [how can knowledge] be given a foundation that is true beyond doubt?"

At this point Menger encountered the problem of induction, which was a serious problem because induction was supposed to be the "approved" method for obtaining scientific knowledge about the world and establishing its credibility. [In the 20th century the attempt to give a credible account of induction turned into the program to attach numerical probabilities general theories, as a second best to establishing their truth].

"Menger's joint justificationist-inductivist theory of knowlege entails that abstraction is conceived of as a process rather than as the description of a set of hypotheses with particular properties, regardless of how they were arrived at. But Menger is not a naive inductivist. He is well aware of the logical problem that arises if one maintains that general, universally valid laws can be derived from a finite number of observation statements".

Menger turned to the construction of "pure types" (idealised types) as a way out of the dilemma but he never broke out of the inductivist framework. This may be why he published so little in the last 30 years of his life (although Mises in his memoires and reflections attributed this to his profound pessimism about the future of European civilisation). Weber took up Menger's ideas and developed the methodology of idea types, but Birner leapt over that chapter in the history of ideas to take up Popper's ideas on situational analysis.

Situational Analysis

"I shall discuss Popper's analysis of theoretical explanation in the social sciences not only because of its connection with Menger's problem, but also because the problem is still, more than a century after it was first noticed, real, relevant, and unsolved".

"Popper is a methodological individualist; thus, if there are laws of social science, they must be, or be reducible to, laws describing the behavior of individuals. Popper states that there is one such law, which he dubs the rationality principle. It says that people act in accordance with their situation".

As Birner commented, the situation bears a great deal of the weight of explanation, and it is no simple thing because, as Popper used the term in this context, it contains all the relevant aims of the actors and all the available relevant knowledge including that of the means for achieving their aims. Birner went on "The rationality principle, however, is not to be conceived of as subjective or psychological; given the situation, there is only one rational course of action. Latsis called this type of explanation 'single-exit explanations'". Latsis called his model "situational determinism" and that indicates the justificationist flaw that dominated the program, to find the "justified belief" in a particular outcome as determinied by the situation, rather than accounting conjectural solutions in a system with some free play (indeterminism).]

It seems that Popper was very concerned to avoid any whiff of psychologism or subjectivism. He wanted a rational and objective explanation of human action (even allowing for error) and in his desire to avoid psychologism he may have overlooked a way of giving a non-psychological account of subjective appraisals and decisions. This comment anticipates the ideas of Koertge advanced by Birner.

The Status of Laws

Birner then proceeded to consider "What is the methodological status of the laws of social science?"

For Popper the rationality principle has the status of a fundamental law in physics, like Newton's laws of motion, it serves to set the model in motion, to "animate" the social situation. Popper wrote "We need, In order to animate it [the model of the social situation] no more than the assumption that the various persons or agents involved act adequately or appropriately; that is to say, in accordance with the situation."

Similarly, Menger considered that the "definite direction of will on the part of the acting invididual" gave explanations in the social sciences a formal analogy with explanations in the natural sciences.

Moving on to the question "Has the law empirical content, and is it true?" Birner noted that for Popper, models based on the rationality principle may be tested (though the principle itself is almost empty) but for Menger the notion of testing the exact theory of economics against full empirical reality is absurd (due to the large number of complicating factors). As for the truth status of the law, both Popper and Menger deny that it is a priori valid or that it is derived by conceptual analysis.

[Popper's treatment of this topic is probably the most confused part of his work, though it may not be too difficult to fix it up using some of his ideas, plus some Austrian insights and some thoughts from Noretta Koertge and Birner himself].

Birner wrote "There are several inconsistencies in Popper's account of the rationality principle. The RP is a methodological principle, yet it is empirical; it has little empirical content, and it is false, though a good approximation to the truth; but despite its falsity it must not be rejected or replaced by a principle that is closer to the truth".

"Both authors run into problems, and neither solves them: Popper because he lacks an articulated metatheory of the character of idealizing theories, and Menger - although he stresses the idealizing character of theories - because his justificationist epistemology prevents him from explaining how theories on different levels of abstraction are related".

Enter Koertge

Birner then went on to describe Koertge's contribution. This consisted of increasing the empirical content of the rationality principle by injecting more detail into the description of the situation. My gloss on this is that "rationality" in the abstract is replaced by the Austrian notion of purpose in a framework of rules, laws, and traditions with further constraints provided by individual dispositions and perceptions. Depending on the nature of the situation and the time available, the actor can take in more of the situation, calculating more posible options and consequences before making a move. The re-creation of the situation is inevitably conjectural as are the perceptions and expectations of the agents in the situation.

Birner's paper provides a summary account of Koertge's contribution in two papers, "Popper's Metaphysical Research Program for the Human Sciences", Inquiry, 18 (1975) pp 437-62 and "The Methodological Status of Popper's Rationality Principle", Theory and Decision, 10 (1979) pp 83-95. [I would like to thank Alan Oakley for sending me copies of those two articles].

Koertge (1975) described how situations can be fleshed out by exploring the various factors that contribute to the decisions made by the actors. Among those factors are the plans and purposes of the actors, their perceptions of the situation and the means at their disposal. The notion of purpose replaces the assumption of rationality (this is a link with the Austrians). There is no need to assume perfect knowledge, indeed the analysis will often consist of looking for things that the actors did not know about the situation to account for the failure of their plans.

"According to the theory of the nature of man which lies behind situational explanations, man's actions are controlled by his theory of the situation and his decision procedure. [I would think of plastic control here, or guidance, to eliminate the deterministic connotations of 'controlled'] Man's beliefs are controlled by the ideas and information available to him and by his epistemological appraisal procedure. It is because actions and theories are controlled that we may hope to understand them - we may even be able to discover the method in madness...It is because the theories and appraisal procedures are OPEN to correction and improvement that man can become rational in the strong prescriptive sense of the word".

Koertge sums up the paper by suggesting that the model for situational explanations has the same formal (deductive) mode of explanation as the natural sciences and that the heuristic potential of the approach is provided by the metaphysical [and Austrian, praxeological] principle of "man as a rational problem-solving animal". Perhaps it would help slightly to refer to man as a "potentially critical and argumentative problem-solving animal" to avoid the multiple ambiguities of the word "rational" and to emphasise the overwhelming importance of language and its higher functions of description and argument.

Hempel followed Popper and applied the "covering law" model to human actions.

A was in a situation of type C

A was a rational agent

In a situation of type C, any rational agent will do x

Therefore A did x.

Hempel claims that this is a lawlike situation and the rational agent is to be construed as a "descriptive-psychological concept" which describes certain "broadly dispositional" features of a person. Hempel drew the comparison of the rational agent and the ideal gas.

Dray rejected the covering law model in favour of explanation by "displaying the rationale of what was done". This looks like an English language version of the continental "verstehan" school of sympathetic or intuitive understanding. These explanations are based on "principles of action" of the form "When in a situation of type C...the thing to do is x". This has a remarkable resemblance to the general principle that is applied in Hempel's "covering law" explanation but according to Koertge, Dray made strenuous efforts to distance himself from Hempel.

Dray's principles can be used to "licence" expectations about an agent's actions but in his view they do not provide a basis for scientific prediction. They function like rules rather than unbreakable laws and so the principles of action cannot be falsified by finding examples where people failed to act in accord with them. Dray did not accept the scientific usage of causation, rather he accepted Collingwood's sense "to cause someone to do something is to provide him with a motive for doing it...the necessity of a causal connection, when it is action that we are talking about, is very often rational necessity".

Moving on to Popper, Koertge suggests that it is ironic that Dray considered Popper to be in the scientific/positivist camp with Hempel when he really falls closer to the situational analysis of Collingwood and Dray. This is not irony, it simply reflects the fact that Popper's views on causation changed over time and the old views (sometimes called the Popper/Hempel model) persist in successive editions of OSE while his more recent views on situational analysis are dogged by contradictory claims and statements about the status of the rationality principle which eventually appeared in an accessible form in a collection of papers in 1994. It was especially confusing when he refered to the rationality principle as an animation principle, analogous to Newton's Laws in the explanation of celestial motion. That was in a Harvard lecture in 1963, published later in French, then in a shorter English version in a collection of Popper pieces edited by David Miller and finally in a collection of papers The Myth of the Framework (1994).

One of the developments that Koertge identified in Popper's ideas is an increased emphasis on the agent's perception or theory of their situation. [Koertge does not elaborate on that, but it has at least two aspects. One concerns the values of the actor, exemplified in the difference between the Good Samaritan who crossed the road to help the victim and the Bad Samaritan who crossed the road to see if there was anything left to steal. The other aspect is the appraisal of the situation, what the actor actually picks out as the salient features of the situation, and what was overlooked either through haste or simply because it was out of sight, around the corner or over the hill.]

The Revised Explanatory Schema

Koertge suggested the following explanatory schema:

1. Description of the situation. Agent A was in a situation of type C.

2. Analysis of the situation. In a situation of type C the appropriate thing to do is x.

Koertge suggests that her reconstruction of Popper's schema agrees with Dray in recognizing the role of normative appraisals (regarding the appropriate thing to do) however Popper's scheme persists with the general or "covering" law and that remains a problem.

The covering law is the Rationality Principle and it differs from Hempel's approach where the generalization is limited to the particular situation (corresponding to Koertge's 2, Apprasial of the situation). The second difference between Popper and Hempel is that Hempel used psychological laws for explanation whereas Popper was determined to expel psychologism. [Maybe this was partly motivated by the desire to avoid reduction to theories of psychology that he regarded as highly unsatisfactory and unscientific, also to his desire to avoid subjectivism (which he associated with caprice and arbitrariness). However he could have given more weight to world 2 events because these are real in his three world ontology].

At this point Koertge invokes the three world theory so that "For Popper, the explanation of actions requires a causal interaction between the three worlds". She then turns back to the content of the rationality principle (which might be better called the principle of purposeful action, or reasoned action [Oakley] or in the language of Talcott Parsons, the voluntarist theory of human action).

i) Every action by a person is a rational [reasoned] response to some problem situation. At this point there is a need for a supplementary theory about detecting problem situations. Then

ii) Every person in a problem situation responds rationally [in a considered way] to it. [Of course this does not preclude ill-considered action which fails to solve the problem or makes it worse. We need to avoid the intrusion of justificationism, in the form of an implicit assumption that the rationality principle has to be a theory of correct or successful action].

For Koertge a rational response [I would prefer "considered"] has three characteristics:

i) arrived at through appraisal of the set of possible solutions

ii) description of the problem and the appraisal process could be verbalised

iii) the person chose as a result of the appraisal procedure (would have taken a better option if it was available).

Koertge noted that there has to be some provision for errors and glitches, both on the part of the actor and in the function of mechanisms and systems that might be activated by the actor. [recall Menger's list of disturbances including error and laziness].

Consequently Koertge develops the explanation in two stages, first using the Rational Appraisal Principle (the process of deliberation) and then the Rational Action Principle. The scheme is still, to my mind, complicated by using the term "rational" which carries too much baggage (like "social" in other contexts). We are talking about considered and purposeful action and that opens up the way to find what options were considered, and what purposes the actor had in mind.

Koertge then turned to the question of the criticizability of the rationality principle. She quoted Popper "...the attempt to replace the Rationality Principle by another one seems to lead to complete arbitrariness in our model building". She suggested that the RP may have something like the character of a point of view that is required to write history (on Popper's account), points of view which cannot be directly tested against evidence, rather they are evaluated in terms of their interest and fertility. There is no doubt in my mind about the fertility of situational analysis because it begs all the questions that need to be asked about events, pointing the way to a pluralistic account of history and society, in contrast with monistic and reductive accounts which attempt to explain everything in terms of some psychological driving force, or a historical theme, or an economic principle.

Koertge suggesting that the RP is the "hard core" of Popper's progarm. "The positive heuristic is provided by his metaphysical theory of man as an evolving rational problem-solving animal. The program would then be evaluated in terms of its explanatory success in areas such as economics, anthropology and cognitive psychology". Quite so! That is the approach that characterises the Austrian school of economics, using the principles of praxeology and it was re-invented by Talcott Parsons in The Structure of Social Action (1937).

Developments since 1990 (and earlier) to take into account

In preparation. This will pay attention to work by Oakley to spell out the implications of Popper's "three world" ontology, to the convergence (that has yet to happen) of Misean praxeology, Popper/Collingwood situational analysis and the Parsonial action frame of reference. Plus the work by Ian Jarview in Concepts and Society (1973) and Boland's (1982) Popper/Hayek model to tweak neoclassical economics.